Oil stays above $93, awaits supply, demand cues

SAN FRANCISCO (MarketWatch) — Oil futures finished with a small gain Monday, holding their ground above $93 a barrel, with the market considering a potential rebound in U.S. crude supplies and awaiting oil-demand cues as the corporate-earnings season kicks off this week.

Crude oil for February delivery
US:CLG3
added 10 cents, or 0.1%, to settle at $93.19 a barrel on the New York Mercantile Exchange.

That was the highest settlement price for the February contract since mid-October. Prices for front-month crude haven’t settled at a level that high since September, according to FactSet data.

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Futures prices ended 2.5% higher last week, on the back of a significant drop in crude supplies in the U.S. and relief that the nation’s policy makers reached an agreement to avert the fiscal cliff.

The U.S. Energy Information Administration on Friday reported that crude supplies for the week ended Dec. 28 fell by a much higher-than-expected 11 million barrels. The report had been delayed by two days because of the New Year’s Day holiday. Analysts said the supply drop was due to end-of-year tax considerations and that supplies would soon bounce back. See Friday’s column: Oil futures end above $93, gain for the week.

“We should see supply rebound big time this week,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “Even with the drop in supply, U.S. crude stocks stand at 359.9 million barrels — which is well above the five-year average and near record supply in Cushing, Okla.,” the delivery point for Nymex oil futures.

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Oil stays above $93 a barrel.

Flynn expects data this week, covering the week ended Jan. 4, to show a climb of 5 million barrels in crude supplies. The American Petroleum Institute will post its inventory report on Tuesday evening, while the EIA will release its own report Wednesday morning.

The EIA is also scheduled to release its monthly short-term energy outlook report Tuesday.

“Crude oil has now had a fairly strong rally from its ‘buyer’s base’ at the $85 level,” said Jason Rotman, president of Lido Isle Advisors in Newport Beach, Calif. “This recent rally looks to us to be more of a short-covering rally since the $85 level held so well. We think the supply fundamentals still remain bearish for this market.”

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